California dream turning into a nightmare for middle class

California has turned into a high-tax, socialist state where the working middle class has to support millions of illegals and highly paid government employees. The state income tax has now broke the 10 percent barrier. The number of people leaving has for the first time in 70 years outpaced the incoming number, (including illegals).

Nevada, Arizona, California and Florida had the nation’s top foreclosure rates. In Nevada, one in every 70 homes received a foreclosure filing, while the number was one every 147 in Arizona. Rounding out the top 10 were Idaho, Michigan, Illinois, Georgia, Oregon and Ohio.

Among metro areas, Las Vegas was first, with one in every 60 housing units receiving a foreclosure filing. It was followed by the Cape Coral-Fort Myers area in Florida and five California metropolitan areas: Stockton, Modesto, Merced, Riverside-San Bernardino and Bakersfield.

The Scobleizer has written a good blog post on the subject. Scoble is an IT and social media guru in Silicon Valley who often visits Texas. He interviewed the Texas governor, Rick Perry and they Twitter each other. Even after the real estate bubble burst in 2005-06, and homes fell in price by 20 percent each of the last three years, homes are still overpriced and only 10 percent of California  households can afford median-priced homes. Nationally, 50 percent can afford the median-priced home.

The state of California has lost it’s glamorous image. I think of it now as a congested, welfare state with the highest taxes in the United States and the largest “public” workforce to support. Did you know that most of the government employees retire at full pay after 20 years of service?

Joel Kotkin of the SF Chronicle wrote this piece in 2007.

California has been losing ground in the new millennium. In 2004-05, it fell to 17th, behind not only fast-growing Arizona and Nevada but also Oregon, Washington and rival “nation-state” Texas.

Job creation has been even less impressive. In the Bay Area and Los Angeles, it can only be considered mediocre or worse. If not for the strong performance of the interior counties of the state — what Bill Frey and I call the “Third California” — the state already would be rightly considered a laggard when it comes to creating employment.

More disturbing, as California’s population has grown — largely from immigration — per-capita income growth has weakened. From the 1930s to as late as the 1980s, Californians generally got richer faster than other Americans. In 1946, Gunther reported, Californians enjoyed the highest living standards and the third-highest per-capita income in the country.

Today, California ranks 12th in per-capita income. And it’s losing ground: Between 1999 and 2004, California’s per-capita income growth ranked a miserable 40th among the states.

This slow growth reflects a gradually widening chasm between social classes. Although the rest of the country has also experienced this trend, the gap between rich and poor has expanded more rapidly in California than in the rest of the country.

Today, notes a recent study by the Public Policy Institute of California, California has the 15th-highest rate of poverty of all American states. When cost of living adjustments are made, only New York and the District of Columbia fare worse. Tragically, many of California’s poor are working. Somehow, this does not seem the best road to the governor’s dream of a “harmonious” society.

How did this happen to our golden state? There are many causes.

Certainly poverty has been greatly exacerbated by huge waves of immigration, particularly from Mexico and other developing countries. But other states — including Texas and Arizona — have also absorbed many immigrants, as well as people from the rest of this country, and have not experienced similarly strong jumps in their poverty rates.

Changes in the economy are clearly suspect. From the 1930s to the 1980s, California created a broad spectrum of opportunities for white- and blue-collar workers alike. Even the 1990s expansion, suggests Debbie Reed of the policy institute, helped reduce poverty by expanding a wide range of employment opportunities.

Today, economic growth in California — like that in much of the Northeast — seems tilted largely toward elites. Once a state known for its relative social democracy, the Golden State is becoming what Citigroup strategist Ajay Kapur has dubbed a plutonomy, dominated largely by a small wealthy class and their spending.

For example, despite all the hype about the renewed Internet boom in Silicon Valley, there has been only modest expansion of employment, even in the past year. Undoubtedly lavish takings by a relative handful of engineers, managers and investors are boosting high-end restaurateurs in San Francisco and revving up BMW sales, but benefits don’t seem to accrue as much to assemblers, midlevel managers and other high-tech workers.

Similarly, the governor’s entertainment industry friends, as well as art and developer elites close to Mayors Antonio Villaraigosa and Gavin Newsom, may feel these are the best of times. But Los Angeles and San Francisco, along with Monterey, now suffer a poverty rate of more than 20 percent, among the highest level in the country.

Parallel to these developments, California is losing its once broad middle class, the traditional source of its political balance and much of its entrepreneurial genius. Outmigration from the state is growing and, contrary to the notions of some sophisticates, it’s not just the rubes and roughhouses who are leaving.

Indeed, an analysis of the most recent migration numbers shows a disturbing trend: an increasing out-migration of educated people from California’s largest metropolitan areas. Back in the 1990s, this was mostly a Los Angeles phenomena, but since 2000, the Bay Area appears to be suffering a high per-capita outflow of educated people.

This middle class flight is likely driven by two things: greater opportunities outside the state and the cost of housing in-state. Over the past 50 years, housing prices in coastal California in particular have grown much faster than elsewhere; the Bay Area’s rate of housing inflation over the past 50 years has been twice the national average.

Given the shrinking per-capita income advantage for being in California, moving elsewhere increasingly makes sense, particularly for those who do not already own homes and don’t have wealthy parents. In some parts of the state, barely 10 percent of households can now afford a median-price home; in the rest of the country that number is roughly 50 percent.

These trends suggest that California could be devolving toward an unappealing model of class stratification. As educated white-collar and skilled blue-collar workers leave, businesses in the state will be forced to truncate their operations — perhaps having an elite research lab, design office or marketing arm in California but shunting most midlevel jobs elsewhere.

7 thoughts on “California dream turning into a nightmare for middle class

  1. My wife and I used to live in California. We are both engineers and probably fit your stereotype about those leaving California. But, how can you not leav? We were renting a 2 bedroom apartment in the Bay area for $1900/month and paying almost $1000/month in state income taxes. We now live in Texas in a very nice home we own (paying $1432/month for everything including taxes, insurance) and pay no income taxes. Our income is the same. So, leaving California just makes so much economic sense unless you are very rich, or poor. And, that is the problem is it not? The incentives in California are to be rich or poor. If you are in the middle, you just get milked.

  2. undocumented workers contribute a considerable amount of money into the tax system, and dont reap the benefits. they contribute to sales and income taxes ($28 billion & $40 billion yearly) but are considered among the poorest in the country -the low wages they earn, below minimum wage reduce costs to farm owners and increase their profits while maintaining the largest and most diverse agricultural system in the country. -and most migrants never plan to settle permanently in the US. most plan to return to mexico after earning money here. they used to farm in mexico, than we put them out of business so they couldnt earn money there, and came here (among other reasons). mexico has to import its primary staple diet foods from the US and militarization of the border doesnt reduce the number of immigrants attempting cross the border, it reduces the flow of migrants trying to go back.

    and being a public worker affords you more protections where as a private business can lay you off at any time for any reason (or none). health benefits are a major attraction to these jobs because few private business offer them (no one considers starbucks a career path job). and many military veterans who retire after 20 years of service go on to open there own business with their pensions, that is to say, retirement does not necessarily mean “freeloader”.

    as far as a “welfare” state goes, the primary goal of government is to protect the people, this usually translates to supporting the military, but what good is a country if it doesnt protect its sick, its elderly and its poor. -and fuck it, help drug addicts too, prevention and rehabilitation services are more effective and cost effective than throwing them into prisons where they can get drugs just as easily -once theyre released they cant get work because of a criminal record. if you treat them effectively they can become functioning members of society.

    california has some significant problems, but youre looking at it all wrong. do your homework dude

  3. Ca is paralyzed, by required spending and capped taxes.. they have no way out.. guess its time to sing ‘we’ll all go down together’.. the song fits… goodnight gracy….

  4. Physically and mentally distressed of living here in Los Angeles, CA. Middle class with the highest State income tax, property tax stolen for millions of illegal’s Mexican offspring for schools, We get gang graffiti filthy neighborhoods littered with trash by illegal’s. This State has rapidly disintegrated since I excitedly moved here in 1984. Radical Liberal policy is stealing from the educated hard working middle class to subsidize the illegal, poverty infested aliens who break thru our borders and rob, pillage, rape, drive drunk, kill our citizens, teenagers breeding out of control like animals, importing violent brazen murdering Mexican thug terrorism, overflow our prisons, fill up the emergency rooms with billions of unpaid hospital bills forcing closings leaving few options for trauma to those of us paying extortion rates for mediochre health insurance, Illegals march in front of the line with offspring in tow. The deep sadness and depression of having to leave this dreadful prison of a different third world State has transitioned from livable, decent, beautiful to a hell hole of epic proportions. The Liberal wealthy Liberal elites with private armed security, electric gates and living segregated from the filth and dangerous criminals. Their children go to expensive segregated pricey private schools. They pass laws to hurt and break down the white middle class, more oppresive taxes, higher state sales tax, property tax, tax bonds on property tax bill for illegal’s clogging up our educational systems while spittng on our flag and speaking HisSpanic only. Our white children are suffering. The idiot, moron above state these gate crashers criminal alines are paying into the system more than they receive is insane and disordered reasoning. Mexican workers are mostly paid cash under the table , low wages. They pay NO, INCOME TAX, NO FEDERAL TAX, NO PROPERTY TAX,NO Business license Tax’s Corporate Tax’s, Fee’s for living a legitimate life we citizens can’t escape , and their jackpot is Free health care per multiple child, Free hospitalization, social security benefits. $400 or more per mo. food stamps, Free housing, Section 8, Free money to immigrants. more money per each illegitimate offspring, countless programs, 12 programs counting in benefits. Each child cost the state about $12,000 per year to waste classroom space. Simple math is they are receiving more than $20,000 per year, per peson and not including the $90,000 per illegal for incarceration, and offspring of illegals that are still third world living a live of taking and crime producing. and the list goes on and on. Our state is wrecked, or downward spiraling due to the wanton importation of the third world takers and destroyers. The dumb ass who says they contribute is unworthy taken seriously. Liberalism is a Mental disorder of the worst kind. I’m moving when I retire and sell my home, Good Bye to a once beautiful place to live. The good will leave and the cesspool will grow. The Super rich will have to pay for all the millions of third worlders with 80% tax’s.

    • Could not have said it better.

      I am in my 40s and the places I grew up in just 30 years have been taken over and ruined and are not safe at all. I have three young children, my wife and I own a home and don’t want to be here anymore, most of our friends have already moved to other states. The schools are a disaster unless you are in one of the few areas where the houses are over a million. Los Angeles will become a cross between TJ and Detroit.

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